Extension pricing
Extension pricing is called also an ethnocentric pricing or single export-pricing is a pricing policy when a price per unit will be the same globally. Other types of pricing policies are a polycentric pricing policy and geocentric pricing policy. Choosing the pricing policy mainly depends if company has centralised or decentralised structure of making decisions. In case of an extension pricing policy, decisions are made centrally. The extension pricing has below characteristics [1][2][3][4][5][6]:
- does not take into consideration geographical location of buyer,
- does not respond to prices of competitors in each national market,
- does not respond to market conditions in each national market,
- importer and customer covers freight and import duties,
- discount matrices are used (existing pricing constructs),
- pricing is based on hierarchy of products,
- is used for companies which has global customers,
- is used for products with low level of differentiation,
- refers mainly to companies with international marketing,
- might be established in specific time, for example annually.
The advantages and disadvantages of an extension pricing policy
The main advantage is that an extension pricing policy creates extreme simplicity of pricing processes. There is no need to focus and look for information about local market conditions and competitors, which makes implementation of policy quite fast. Moreover, it reduces time spent on setting prices in the system as there is no need to differentiate prices in markets[7]. On the other hand, an extension pricing policy causes that the company is not responding to changing circumstances of local markets and actions of competitors. Profit of the company is not maximised[8].
Brand extension pricing
When the company decides to extend its brand from the main brand, it will also require to work out policy towards pricing. Firstly the marketing research should be accomplished with all discoveries in marketing techniques, promotions, brand values but also policy of pricing extension.
Examples of Extension pricing
- Apple Inc. - Apple Inc. has been using an extension pricing policy to set prices for its products across the world. For example, the latest iPhone 12 Pro Max is priced at $1,099 in the United States, €1,169 in the Eurozone, ¥119,800 in Japan, and £1,099 in the United Kingdom.
- McDonald's - McDonald's has a global pricing policy in which all its products are sold at the same price all over the world. For example, a Big Mac is sold at the same price all over the world, regardless of the currency exchange rate or the country's economic situation.
- Burberry - Burberry, the luxury fashion company, follows an extension pricing policy in which its products are sold at the same price in all countries. This is done to create an illusion of exclusivity and to project the same brand image across the world.
- Polycentric Pricing Policy - A polycentric pricing policy is a pricing strategy where the price of a product varies depending on the market it is being sold in. This approach allows a company to account for different factors in different markets, such as cost of living, taxes, and purchasing power.
- Geocentric Pricing Policy - A geocentric pricing policy is a pricing strategy based on the cost of production and delivery of a product regardless of the market it’s sold in. This approach allows a company to price their product more efficiently and helps them to maximize their profits.
- Competitive Pricing Strategies - Competitive pricing strategies involve setting prices based on what the competition is charging. This approach helps companies compete more effectively in the market and allows them to gain a larger market share.
In summary, extension pricing is a pricing policy when a price per unit will be the same globally. Other pricing policies include polycentric pricing policy, geocentric pricing policy, and competitive pricing strategies. Each of these approaches has its own advantages and disadvantages, and companies should consider them when setting their pricing strategies.
Footnotes
| Extension pricing — recommended articles |
| Cartel — Market based price — Factors affecting pricing — Price-Taker — Focus strategy — Administered price — Pricing strategy — Price control — International marketing mix strategy |
References
- Aamer M. A. (access: 2019), Siebel Customer Order Management, Blackbook (e-book) at www.books.google.pl
- Chilton Company, (1990), Chilton's Distribution, Chilton Company
- Ferry County (2016), Customer service policies for the electric distribution system of your public utility district, Ferry County P.U.D.
- Horská E., (2014), International marketing within and beyond visegrad borders, Episteme, Poland
- Kaynak E. (1991), International Marketing: Sociopolitical and Behavioral Aspects, Routledge
- Keegan W. J., Green M. C. (2000), Global Marketing, Prentice-Hall
- Keegan W. J., Rolf S. F. H. (1999), Global Marketing Management, Prentice Hall
- Newton B. R. (2011), Multi-Year Policy Pricing in "Casualty Actuarial Society E-Forum, Winter 2011 Volume 2", Casualty Actuarial Society
- Seyoum B., Kaynak E. (2000),Export-import Theory, Practices, and Procedures, Psychology Press
Author: Ewelina Gał
